The Death Of The Internet Has Been Greatly Exaggerated

The news, I’m afraid, is dire. The Internet is about to be destroyed by big media. It is about be killed by two Congressional bills – The ProtectIP and The Stop Online Piracy Act (SOPA) – that all-powerful big media lobbyists are now pushing through Congress. These bills will censor the Internet, turn it into China, censor it, destroy its innovation and value.

“Big media is going nuclear against the DMCA,” thus writes the author and serial entrepreneur Ashkan Karbasfrooshan, arguing that ProtectIP and COPA will “spell the end of the Internet as we know it.” Techcrunch’s Devin Coldeway, describing SOPA as “possibly unconstitutional” and as a “kill switch”, says it is a “desperate power grab by a diminishing elite”. CNET columnist Molly Wood chimes in that SOPA is “brazen” and “nightmarish” and warns that it will result in a “copyright police state”. The Obama administration is “busy in bed with Hollywood,” she warns, “cheerfully ceding your rights to the MPAA and RIAA.”

Even the VCs are worried. Union Square Ventures’ Fred Wilson, argues that “these bills were written by the content industry without any input from the technology industry”. The problem, Wilson explains, is that “the content industry is not creating new jobs right now” and thus, by establishing a destructive legal environment for start-ups, SOPA and ProtectIP will supposedly “kill the golden goose to protect industries in decline.”

But there’s a problem with all this bad news. It’s wrong. Almost entirely wrong.

No, the Internet isn’t about to be destroyed by either ProtectIP or SOPA. The technology industry has had input into the political process. Neither ProtectIP nor SOPA are “unconstitutional” or “nuclear” options designed to kill the DMCA. The administration isn’t in bed, either literally or metaphorically, with big media and the US government isn’t the “villain” in this story. The technology industry – notably Google, who were invited to the Congressional hearings on the legislation – has had significant input into the political process. Most importantly, this legislation – by fighting the corrosive impact of counterfeiting and piracy on the American marketplace – is designed to make our domestic economy stronger, protect jobs both on and offline and encourage innovation in our digital knowledge economy.

So what, exactly, are ProtectIP and SOPA? Rather than being seen as a replacement for the U.S. Digital Millenium Copyright Act (DMCA), the genesis of these pieces of legislation – ProtectIP being authored by the Senate and SOPA by the House – is the need for legal tools to fight primarily online criminals who operate outside of the U.S. jurisdiction and U.S. companies who, often unwittingly, sustain them. Rogue sites legislation exists in parallel to the DMCA and is intended to stop criminal enterprises from accessing US markets online in ways that they would never be able to do offline.

Whatever one might think of some of the details of these bills (no, they aren’t perfect, especially the sometimes sloppily written and occasionally misguided SOPA), they are designed to address a serious problem of the online economy – foreign criminals and companies which use the Internet to sell or distribute illegal or counterfeit goods to American consumers. These companies extend from those that sell advertising off the back of pirated movies to those selling fake drugs online.

It is undeniable that rogue websites – organizations which sell counterfeit goods or peddle stolen intellectual property – are a significant drain on the US economy. Borrowing numbers from various government and private sector experts, it is estimated by one House committee that intellectual property theft alone costs the US economy over $100 billion per year. And as The Guardianreported in September, in its investigation of the impact of fake drugs sales on the UK marketplace, there are almost 13,000 fake pharmacy websites – “most… facilitated by Chinese or Russian criminal organizations”, according to the UK’s Medicines and Healthcare Products Regulatory Authority (MHRA).

Not only, therefore, are SOPA and ProtectIP addressing a set of genuinely costly economic issues, but they’ve also – in the best Madisonian tradition of representative democracy – assembled a broad coalition of supporters for these bills. No, neither SOPA nor ProtectIP reflect the Administration being “in bed with Hollywood.” I talked earlier this week to Steven Tepp, the US Chamber of Commerce’s online piracy and anti-counterfeiting chief, who reminded me that the bipartisan Senate bill had just won its 40th co-sponsor and that 350 organizations – including pharmaceutical giants like Eli Lilly and Johnson & Johnson as well as Nike, Caterpillar and Major League Baseball – signed a September 22 letter to Congress in support of legislation against rogue sites.

But this isn’t just a legislative initiative supported by corporations. 43 State Attorney Generals, the US Conference of Mayors, the AFL-CIO and The National Consumer League are also in favor. And so is US Secretary of State Hillary Clinton who early this month, in defense of legislation that seeks to make it impossible for American Internet users to access criminal foreign websites, wrote that there “is no contradiction between intellectual property rights protection and enforcement and ensuring freedom of expression on the Internet.”

So why is there such a large coalition of firms, organizations and unions in favor of legislation against rogue sites? Fred Wilson says that this legislation was written by a content industry “in decline” that isn’t creating any new jobs. But he’s wrong. Wrong because this is legislation supported, in principle, by many high growth technology providers including small start-ups like ViaTech Technologies, registrars such as Go Daddy and Verisign, software groups such as the Business Software Alliance whose members include Microsoft, Adobe & Symantec, ISPs such as Verizon and AT&T, and even payment processors like Visa who might not love the legislation but recognize that something has to be done online to cut off foreign criminals from the American domestic market.

Not only is Wilson wrong to argue that “these bills were written by the content industry” (is he suggesting that politicians Like Lamar Smith (R-TX), John Conyers (D-MI) or Bob Goodlate (R-VA) are in the pockets of the RIAA or MPAA?), but is also mistaken in saying that “they are trying to fast track them through congress and into law without any negotiation with the technology industry.” The truth is that SOPA and ProtectIP are themselves descendants of other proposed legislation against rogue sites like COICA which have been winding their way through Congress for years.

Wilson is also wrong to write off the content industry as being a thing of the past. Yes, it – especially the music business – has been severely wounded by mass online larceny in the post Napster world, but to write off the entire American entertainment industry as “in decline” reflects Wilson’s tech-centric vision of the world. He fails to mention, for example, that sales in the music industry, for the first time for more than a decade, have increased in the last year. Nor does his acknowledge the size of the traditional content industry or the hundreds of thousands of jobs that it has and continues to create.

Let me be more specific. A report published earlier this month by The International Intellectual Property Alliance, “Copyright Industries in the U.S. Economy: The 2011 Report”, underlines the size and significance of the US copyright industry. The report found that it added over $930 billion in value to the U.S. economy, represented almost 6.4% of the total GDP, employed nearly 5.1 million U.S. workers (nearly 5% of the total private employment sector), with jobs paying an average of 27% more than the rest of the workforce; and accounts for $134 billion in foreign sales and exports, significantly more than sectors such as aircraft, autos, and
agriculture.

This is where Wilson, who deploys no employment numbers to support his argument, is at his most glib. ” The content indusrtry is not creating new jobs right now. The tech industry, led by startups, have created all the net new jobs in the past five years,” he asserts. Companies like Apple, Google, Facebook, and startups like Dropbox, Kickstarter, and Twilio are the leading exporters and job creators of this time. They are the golden goose of the economy and we cannot kill the golden goose to protect industries in decline.”

Facebook, Twilio and Dropbox as the golden goose when it comes to producing jobs? No. Wrong. Dangerously wrong. As MIT’s Erik Brynjolfsson told me, “Amazon, Apple, Google and Facebook collectively employ only 113,000 people.” Or as Thomas Friedman (hardly a tool of the content or copyright industries) noted in July, “Facebook is now valued near $100 billion, Twitter at $8 billion, Groupon at $30 billion, Zynga at $20 billion and LinkedIn at $8 billion. These are the fastest-growing Internet/social networking companies in the world, and here’s what’s scary: You could easily fit all their employees together into the 20,000 seats in Madison Square Garden, and still have room for grandma.”

Grandma, meanwhile, continues to be employed by the content industry, in movie theaters, bookstores and, dare I say it, CD pressing plants (yes, the sale of physical albums still faring well in the music industry)

Besides, by juxtaposing technology and entertainment industries and incorrectly arguing that the tech companies “have created all the net new jobs in the past five years”, he is establishing a false dichotomy between these two critical sectors of the economy. The truth is that technology and content are symbiotic; and thus the most valuable tech companies – from Apple and Google/YouTube to Netflix, Spotify and Union Square investments like Turntable and Soundcloud – are also distribution and discovery companies in an increasingly digital-centric entertainment and information economy.

I’m not against Fred Wilson being against SOPA. That’s obviously his right and some of his criticisms of the legislation have an element of validity – particularly the need to tighten up the language of SOPA so that it can’t be used as an easy excuse by avaricious lawyers to shut down promising start-ups. But what I’m against is this tired Manichaean version of the world which presents all proposed legislation as an either/or, and that whenever there’s an attempt to legislate the Internet, online libertarians erupt into that tired chorus of “Big Media Is Killing The Internet”.

Wilson, for example, implicitely conflates the destruction of DMCA “safe harbor” legislation with the passing of the new legislation – thereby presenting a doomsday scenario in which all promising start-ups from Twitter to YouTube to Netflix will be destroyed by these rogue site bills. But nobody has ever suggested that SOPA/ProtectIP and DMCA should be seen as competing rather than parallel legislation. And its certainly not the goal of any of the bill’s sponsors to make the DMCA redundant.

In the movie The Social Network, the fictional Sean Parker famously says, “First we lived on farms, then we lived in cities, and now we’re going to live on the internet!” He was right. And one of the responsibilities that goes with living on the Internet is crafting accountable laws that protect American industry and consumers against foreign criminals. That’s why I’m in favor of passing legislation against rogue sites. And that’s why the stories you’ve read recently about the death of the Internet are, to put it mildly, slightly exaggerated.